The earnings of major oil companies in the U.S. and Europe have taken a step back in the first quarter of 2024 due to a significant decline in natural gas prices compared to the same period a year ago.
Exxon Mobil, Chevron, and TotalEnergies all reported weaker financial results, with profits falling by 28%, 16%, and 22% respectively. This comes after the oil and gas firms enjoyed record-level earnings in 2022, fueled by a surge in demand following the COVID-19 pandemic and the price spike caused by Russia’s invasion of Ukraine.
The sharp drop in natural gas prices has been a key factor behind the softer performance. Henry Hub futures, the U.S. benchmark for natural gas, have been trading below $1.70 per million British thermal units (mmBtu), reaching a 3.5-year low on the back of mild weather and oversupply.
In contrast, global benchmark Brent crude prices have remained largely flat year-over-year at around $81.76 per barrel in the first quarter. However, the higher oil prices from earlier this year are expected to result in declining refining margins for the companies going forward, as geopolitical tensions and OPEC+ production limits take their toll.
Despite the profit declines, the oil majors have continued to pursue acquisitions, with Exxon aiming to close its purchase of Pioneer Natural Resources in the current quarter, and Chevron’s offer for Hess moving ahead, with a shareholder vote expected in late May.